Description
NSE reiterates mandatory requirement for trading members to obtain prior instructions from clients before placing IPO bids, following inspection findings of non-compliance.
Summary
NSE has issued a compliance reminder to all trading members emphasizing the mandatory requirement to obtain prior instructions (physical or electronic) from clients before placing IPO bids on their behalf. This circular follows inspection findings where trading members were uploading IPO bids on the Exchange bidding platform without obtaining prior client instructions, violating existing SEBI and Exchange guidelines.
Key Points
- Trading members must obtain prior instructions (physical or electronic) from clients before placing any IPO bids
- Inspections revealed non-compliance with trading members uploading bids without prior client authorization
- Clients can submit IPO applications through designated intermediaries or online platforms with secure login credentials
- Intermediaries must provide acknowledgement to investors upon receipt of application (counter foil or application number)
- Physical application forms for UPI payments must be retained for 6 months, then forwarded to issuer/Registrar
- Electronic application records must be maintained for minimum 3 years
- This circular reiterates existing requirements from SEBI circulars dating back to 2018-2019
Regulatory Changes
No new regulatory changes introduced. This circular reiterates existing regulations from:
- SEBI/HO/CFD/DIL2/CIR/P/2018/138 dated November 28, 2018
- SEBI/HO/CFD/DIL2/CIR/P/2019/76 dated June 2019
- SEBI/HO/CFD/DCR2/CIR/P/2019/133 dated November 8, 2019
- NSE/IPO/42640 dated November 13, 2019
Compliance Requirements
For Trading Members:
- Obtain prior instructions from clients before placing IPO bids (physical or electronic format acceptable)
- Provide acknowledgement to investors upon application receipt (counter foil or application number)
- Retain physical application forms with UPI payment mechanism for 6 months before forwarding to issuer/Registrar
- Maintain electronic application records for minimum 3 years
- Ensure secure login credentials (username and password) for clients using online IPO bidding platforms
- Ensure immediate compliance with these requirements to avoid regulatory action
For Investors:
- Submit complete bid-cum-application form to designated intermediaries
- Obtain acknowledgement/proof of application submission
- Can use online platforms provided by trading members with secure credentials
Important Dates
- Circular Date: October 30, 2025
- Circular Reference: NSE/INSP/71037, Circular Ref. No: 65/2025
- Effective Date: Immediate compliance required
- Record Retention: Physical forms - 6 months; Electronic records - minimum 3 years
Impact Assessment
Operational Impact:
- Trading members must review and strengthen internal processes for IPO bid placement
- Additional documentation and record-keeping requirements may increase operational overhead
- Need for robust systems to capture and store client instructions (physical/electronic)
Compliance Impact:
- High compliance risk for trading members who have been placing bids without prior instructions
- Increased scrutiny during NSE inspections on IPO processing procedures
- Potential for regulatory action against non-compliant members
Investor Protection:
- Reinforces investor protection by ensuring all IPO bids are authorized by clients
- Prevents unauthorized trading activity in IPO applications
- Enhances audit trail and accountability in IPO bid placement process
Market Impact:
- Strengthens integrity of IPO bidding process
- May temporarily slow down bid processing as members implement stricter controls
- Improves transparency and documentation standards across the industry
Impact Justification
Critical compliance requirement for all trading members handling IPO bids. Non-compliance identified during inspections indicates systemic issue requiring immediate corrective action. Affects investor protection and regulatory adherence.